Thursday, March 7, 2013 | 2 a.m.
The North Las Vegas City Council will take its time considering whether to implement a complicated and controversial program using eminent domain to help underwater homeowners.
The council heard a presentation Wednesday night from representatives of Mortgage Resolution Partners, a company that has been pitching local municipalities around the country on its plan to use private dollars to help underwater homeowners refinance their mortgages and stay in their houses.
Council members had plenty of questions about the plan, which would require the city to lend its powers of eminent domain in order to acquire the underwater mortgages.
“We have a lot of assumptions going on,” Councilman Wade Wagner said. “A lot of times when government gets involved, you try to help with one problem and you create four or five more.”
Wagner and other council members agreed action needs to be taken to address the rash of foreclosures and underwater mortgages that have afflicted North Las Vegas since the housing crash, but they were reluctant to endorse Mortgage Resolution Partners' plan, which has not been tested yet elsewhere in the country.
The plan targets a specific subset of loans held by trusts through mortgage-backed securities, which are especially prone to going into foreclosure, said Las Vegas attorney Byron Georgiou, one of the company’s Nevada representatives.
The program would not require any city funding and would end up saving money in the long term by preventing blight and other problems created by widespread foreclosures, he said.
“The entire purpose of this program is to keep homeowners in their homes; to avoid the blight and deterioration of communities that’s associated with a continuing foreclosure crisis,” Georgiou said.
But to acquire the loan, the city would have to lend its use of eminent domain to extract the specific mortgages from the securities they’re held in.
Once the mortgage is refinanced, the homeowner would get to keep their house with a lower amount owed and the city would get a fraction of the new loan value back for its participation. Mortgage Resolution Partners' investors who put the money up to buy the mortgage would receive a return and the company itself would receive a flat $4,500 per transaction fee.
Using eminent domain in such a way has never been tried or stood up to a legal challenge, but Georgiou said his company’s lawyers believe such a use would be legal.
Council members declined to approve an agreement with the company at its Wednesday meeting that would have allowed Mortgage Resolution Partners to begin identifying eligible mortgages and negotiating with servicers of the mortgages in the city. The council did leave the door open for a future deal and asked that representatives come back within the month to continue discussion and answer more questions.
“I need to know what the consequences really are. We’ve got more information to gather. I don’t want to get through the process and find out ‘Oops, we didn’t expect that consequence,’” Mayor Shari Buck said.
Buck said she plans to talk to other interested parties — including real estate professionals and local chambers of commerce — as well as officials from other cities who have considered working with Mortgage Resolution Partners.
The plan drew mixed response from the public. Several local unions sent in letters supporting efforts to help homeowners, and a representative from Culinary Union Local 226 voiced his approval to the council during the meeting.
But Sean Fellows, government affairs director for the Greater Las Vegas Association of Realtors, told council members using eminent domain to seize mortgages could have negative consequences.
Fellows called the plan “an extremely poor policy solution” that could conflict with constitutional rights and consumer protection laws. If the city used eminent domain to acquire mortgages, he predicted lenders would tighten their lending practices in the area.
“This could make it much more difficult for people in our community, not just the ones taking part in the program, to obtain mortgages or even try to refinance an existing mortgage,” Fellows said.